Think 7.5% Inflation Was Bad? How About FLEXIBLE Core Inflation At 19%! (2-year Treasury Yield Skyrocketing Along With Mortgage Rates)

I thought the last inflation report of 7.5% inflation was bad. But then the Atlanta Fed updated their inflation measure for flexible prices. Flexible inflation, less food and energy, is roaring at 19% YoY!

Flexible prices are those prices that adjust rapidly. Along with commodity prices.

Speaking of rapid rises, take a look at the 2-year US Treasury yield since COVID struck in early 2020.

We did see 2-year Treasury yields generally correlated with The Fed Funds Target Rate … at least until COVID struck. Since mid-2020, The Fed Funds Target Rate remains at 0.25% while the 2-year Treasury yield is roaring back with fuzzy expectations from The Fed’s leadership.

The 10-year Treasury yield is not rising as rapidly as the 2-year Treasury yield, but it is hovering around 2%.

But Bankrate’s 30-year mortgage rate is rising like a comet, similar to the 2-year Treasury yield.

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UMich House Buying Conditions Falls To 71 As Fed Monetary Stimulypto Continues! (10Y-2Y Treasury Curve Slipping Into Darkness)

The University of Michigan consumer survey is out for February. And an ugly survey is it! Buying conditions for housing fell to 71 as The Federal Reserve continues it monetary stimulypto!

Despite 7.5% inflation, The Fed continues its “Stimulytpo” monetary policy.

As the US Treasury 10Y-2Y yield curve is slipping into darkness.

US consumer confidence is the lowest in 10 years as the yield curve crashes.

Here is the POMO schedule just released by The Fed.

I am reminded of my roommate at University of Wyoming who played James Brown over and over and over again. Much like The Fed doing nothing to curb inflation. Until they finally do something with a crashing yield curve.

Can’t wait for Powell to turn The Fed loose.

Bidenflation? WTI Crude UP 91% Under Biden, Foodstuffs UP 47%, 30Y Mortgage Rates UP 39% (6-7 Rate Increases, What’s It Going To Be?)

Well, it has been a cringe-worthy year+ under President Biden. West Texas Intermediate Crude futures price is up 91% and the Commodity Research Bureau Foodstuffs index is up 47%. Talk about Biden’s energy folicies being passed through to American households in the form of higher food costs and energy prices!

And then we have mortgage rates. Bankrate’s 30Y mortgage rate is up to almost 4%, up 39% since the beginning of 2021.

Other central banks are raising rates like banshees on the moor, while The Federal Reserve continues to send conflicting signals about possible March rate hikes.

Goldman Sachs sees 7 rate hikes in 2022, culminating in an eventual 2% rate in December.

Fed Funds Futures are signalling 7 rates increases by the February 1, 2023 meeting.

6 or 7 rate hikes, what’s it going to be?

It’s just like Biden to blame COVID for reckless Federal monetary and fiscal policies that overloaded the system.

Slowing! Mortgage Purchase Applications DOWN 12% YoY (Mortgage REFI Applications DOWN 50% YoY)

The Mortgage Bankers Association (MBA) released their weekly mortgage application survey this morning. Mortgage applications decreased 8.1 percent from one week earlier, for the week ending February 4, 2022.

The Refinance Index decreased 7 percent from the previous week and was 52 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 10 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 12 percent lower than the same week one year ago.

And mortgage refinancing applications are down 50% since the same week last week.

Here are the stats. Pretty much down across the board.

Given a slowing mortgage market, I designate The Office’s Kevin Malone as the face of the market with rising interest rates.

30 Tons! Mortgage Rates Rising As Fed Navigates Rising Rate With $30 Trillion In Federal Debt (Good Time To Buy Home Hits All-time Low)

30 Trillion in debt and what do you get? Another day older and deeper in debt. What else do we get? Rising inflation and rising interest rates.

Mortgage rates are rising rapidly as The Federal Reserve contemplates 5-7 rate increases over the next year and removing their balance sheet stimulus.

And according to Fannie Mae, the share of Americans to say it’s a good time to buy a home hits an all-time low.

Yes, I want to see how The Federal Reserve will navigate the rising rate scenario in the face of $30 trillion … and growing … Federal debt load.

Instead of Tennessee Ernie Ford, I want to hear Delaware Joe Biden explain this to us.

Alarm! US 30-year Mortgage Rates UP 100 Basis Points Since Jan 4, 2021, REAL 30-year Rate Is Now -3.2% (And UP 57 BPS Since Dec 31, 2021)

Alarm!

US 30-year mortgage rates are up 100 basis points and climbing since January 4, 2021. Most of the increase has occurred since the turn of the year into 2022. According to the Bankrate 30-year mortgage rate index, the 30-year rate is up 57 basis points just since December 31, 2021 as the benchmark 10-year Treasury yield rises.

Bear in mind that the REAL 30-year mortgage rate is now -3.2%. Get it while you can!!

Given today’s surprise jobs report, The Fed now has a green light to raise rates.

To quote Van Morrison and Them, “Here Comes The Night” for the housing and mortgage market.

Reversal Of Fortune: Yield Curve Drooping As 2022 Forecast To Be Slower Market For Housing

No, not the Klaus von Bulow type of “reversal of fortune” (when he killed his wife). I am talking about a reversal in fortune for America.

Let’s look at the 10Y-2Y Treasury curve. It typically falls below 0 basis points before every recession. Except the mini-COVID recession of 2020. But notice that the Treasury curve did not recover from the COVID recession as it typically did. More along the lines of 1984-1985.

Speaking of Reversal of Fortune, everything changed once Fed Chair Powell started to speak after Tuesday’s FOMC meeting.

Hmm. Midterm elections, possible Russian invasion of The Ukraine, further problems in China, etc. While The Fed Funds Future data implies that The Fed may raise their target rate 5 times over the coming year, we’ll see.

I happen to agree with Fannie Mae’s Doug Duncan who says that he is less bullish about the housing market in 2022.

If 2021 was a great year for the US housing market, 2022 faces “a new normal” marked by a slowing down of home price rises, job layoffs in the mortgage industry, and concerns over rising inflation and interest rate hikes, according to Douglas Duncan (pictured), Fannie Mae’s senior vice president and chief economist.

Duncan said “a shift” was underway in the market and the wider economy, which would result in far more moderate home price appreciation, expected to be between 7% and 7.5% this year due to the ending of fiscal and monetary stimulus.

“One of the elements of the shift is that you’re going to see house prices up, but not nearly as far as they were in the last two years because that was driven hugely by the fiscal and monetary stimulus (now) being removed,” he told MPA.

Ominously, he added that low interest rates “may never be seen again”. Or at least until Biden appoints more doves to The Federal Reserve Board of Governors.

The doves at The FOMC.

US New Home Sales Crash -14% YoY In December As Median Price Slows To +3.4% YoY (Mortgage Applications Decline As Mortgage Rates Increase)

US new home sales spiked in December by 11.9% from November, but were down 14% year-over-year.

But the median price of new home sales (YoY) declined to 3.4%.

The Midwest saw a surge in new home sales (+56%).

The MBA’s mortgage applications index shows declining purchase applications (-1.83%) and declining refinancing applications (-12.60%) as mortgage rates increased from 3.64% to 3.72% for the week of 01/21.

Now, mortgage purchase applications rose for the week of 01/21 if we used non-seasonally adjusted data.

US Existing Home Sales: Still No Inventory, Median Price UP 14.85% YoY (Freddie’s 30Y Mortgage Rate Rise To 3.56%)

The banner headline is … US existing home sales declined 4.6% MoM in December. But that isn’t the interesting news. The interesting news is the mystery of the missing housing inventory. While various pundits told us that inventory would be returning … it isn’t. And the median price of existing home sales is up 14.85% YoY with insane Fed stimulus still in play.

That was December. What will January bring with rising mortgage rates? Freddie Mac’s 30-year commitment rate rose to 3.56% today.

When will housing inventory for sale start to increase? Probably about the same time The Fed ACTUALLY starts raising interest rates and paring back on the monetary stimulus.

US Multifamily Housing Starts Jump 13.7% In December, 1-unit Starts Fall -2.25% As All Eyes On Fed

Now we have people like JPMC’s Jaime Dimon speculating about 7 rates increases in 2022 and other bankers speculating about a faster than expected withdrawal of the The Fed’s monetary stimulus in the form of asset purchases, we have to anticipate what the result will be in markets.

Like what will happen to housing starts if and when the stimulus is removed.

Today, we saw 1-unit housing starts fall 2.25% from November to December, but multifamily (5+ unit) starts rise 13.7%.

Of course, home price growth of near 20% YoY combined with declining REAL hourly earnings points to more multifamily housing and less single-family detached housing.

Here is the rest of the story, as Paul Harvey used to say. 5+ unit permits are up 19.9% in December while 1-unit permits are up 1.99%.